The construction industry is a rewarding one. Still, nobody is performing work just for fun (probably), so it’s crucial to have a handle on payments. We normally talk about making sure those payments navigate their way through the construction payment chain. That’s incredibly important, and it’s a huge issue facing the construction industry. But knowing how much should be paid is equally important. On construction projects where prevailing wage laws apply, it’s important to abide by those rules. Let’s look at the prevailing wage rules under California law.
Video Summary of California Prevailing Wage Laws
California Prevailing Wage Rules
California law requires that, on public works projects, pay to workers must equal:
“the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed, and not less than the general prevailing rate.”
However, this does not apply to public works contracts $1,000 or less. Further, the law also states that:
The contractor to whom the contract is awarded, and any subcontractor under him, shall pay not less than the specified prevailing rates of wages to all workmen employed in the execution of the contract.
We don’t love quoting the statute, but this one is pretty clear: prevailing wage is a serious topic in the state of California.
How are California Prevailing Wages Determined?
California prevailing wage determinations are set by the Director of the Department of Industrial Relations (DIR). The director sets the prevailing wage rate according to “collective bargaining agreements and rates predetermined for federal public works, within the locality and the nearest labor market” under California Labor Code § 1773.
If the director determines that those rates do not match up with the rates that are “actually prevailing in the locality” the director will find more data from “local labor organizations, employers, and employer associations” about the type of work in question. Then, the rate that will be set cannot be less than the “actually prevailing rate.”
What If an Employer Doesn’t Comply?
Parties that fail to pay the prevailing wage rate can find themselves in hot water. Prevailing wage rates are enforced a little bit different than things like a lien or bond claim. Committees are actually in charge of keeping tabs on prevailing wages.
29 U.S.C. §175a explains the establishment of committees formed to improve management relationships, job security, and many other areas of employment — including resolving prevailing wage disputes. Those committees are made up of employers and labor organizations that represent employees in a given industry and a given location.
In California, these committees have been established by the Labor Management Cooperation Act of 1978. Accordingly, these committees are able to bring an action against a California employer “who fails to pay the prevailing wage to its employees.”
The action must be brought within 18 months of filing a Notice of Completion with the county recorder’s office in the county in which the public work is located. If an action against an employer is successful, a court will award the employee back wages, plus interest, from the date that the wages were due. Those interest payments can really stack up quickly.
Additional Financial Penalties
And if the thought of interest and back wages is not scary enough, then get a load of this:
Those who fail to pay prevailing wage may be penalized $200 per day, per worker (!!) paid less than the set rate.
To clarify how big of a deal this is, assume the penalty applies to 2 workers who were paid less than the set rate for 2 days. Because the penalty is $200 per worker and per day, this would result in $800 in penalties. Now, imagine if the penalties applied to the entire life of a project and with a full team of workers. Yeah. It’s steep.
But these penalties don’t always apply. Instead, the penalty amount is determined by the Labor Commission based on two factors.
(1) Whether the failure of the contractor or subcontractor to pay the correct rate of per diem wages was a good faith mistake and if so, the error was promptly and voluntarily corrected when brought to the attention of the contractor or subcontractor; and
(2) Whether the contractor or subcontractor has a prior record of failing to meet its prevailing wage obligations.
Obviously, it’s crucial to abide by California prevailing wage regulations. For those without much experience on public jobs, it can seem like a tall order. Luckily, the California Department of Industrial Relations is ready to help. There, you can find the Public Works Manual, a breakdown of prevailing wage requirements, and other forms and resources.